Executives face crisis of confidence as corporate risks climb

26/07/2017

Organisations face greater reputational risks than ever before – but many of Australasia’s senior executives lack confidence in their ability to handle a crisis.

SenateSHJ’s Reputation Reality: Trans-Tasman perspectives on reputation and risk report, the fifth published since 2006, reveals the disconnect between rising risk and executives’ confidence in handling a crisis.

SenateSHJ General Manager and Partner Raphael Hilbron said activism, the ‘outrage economy’ and social media are proving to be significant and pressing challenges for organisations.Senior executives surveyed said protecting reputation is more important than ever – but that it is harder to manage.

This year, episodes including the United Airlines and British Airways crises have spotlighted the speed at which reputational damage can occur.

“Almost all executives surveyed see reputation as a key component of their success, while the risks to their reputation have grown significantly over the last three years, with almost 75 per cent having seen an increase in risks affecting reputation,” said Mr Hilbron.

“Only one in three respondents have high confidence in their ability to roll out their crisis communication plan in the event of a crisis. This is despite business leaders regarding reputation as a primary asset, and almost 90 per cent of organisations believing they are proactive in protecting their reputation.

“Tellingly, only 41 per cent feel confident with managing social and digital media in the event of a crisis, compared to 79 per cent with managing traditional media.

“Compounding this lack of confidence is a major shift in the risk environment. In particular, there has been an emergence of newer and somewhat misunderstood risks such as cyber security, data and privacy issues, and media activism and sensationalism,” said Mr Hilbron.

The trans-Tasman Reputation Reality survey included 146 respondents; 95 in Australia and 51 in New Zealand. Respondents included senior business leaders, including board members, senior executives and senior managers in private and public sector organisations.

The survey explored key issues and challenges involved in reputation risk and management. This is the second trans-Tasman survey undertaken with Catalyst Research, and it builds on three previous surveys undertaken by SenateSHJ in New Zealand.

Thirty-eight per cent of those surveyed identified employee conduct as a major trigger for reputational risk (health and safety, at 56 per cent, was the major trigger in last year’s study), followed by customer dissatisfaction (36 per cent, down from 44 per cent) and data, privacy and cyber security (34 per cent, down from 38 per cent).

Given the decreasing trust in organisations and governments the world over, it was interesting to note that over three-quarters of those surveyed in New Zealand ranked integrity as the key driver of reputation, followed equally by competence and transparency. Integrity ranked overwhelmingly as the key driver of reputation across both countries, although New Zealand organisations placed a much greater weighting on this, at 76 per cent, with Australian organisations at 54 per cent. In contrast, New Zealand organisations placed a much lower weighting on authenticity, at only 18 per cent, as opposed to 37 per cent for Australian organisations.

With regard to systems and processes for managing reputation, New Zealand respondents rated crisis simulation training – one of the most effective ways to prepare for a crisis – as an important monitoring tool, at 69 per cent.

However, the research indicates actions are not backing up beliefs, with only 48 per cent (down from 50 percent) planning to invest in such an important reputation management tool. Customer surveys remain the leading tool to monitor reputation, at 73 per cent. Social media monitoring is almost equally utilised as a tool, at 71 per cent, and usage is now in line with traditional media monitoring – with 71 per cent of respondents planning to do so.